CAGR Calculator
Calculate the compound annual growth rate, total percentage return, and annual progression across any investment horizon.
Input Parameters
InvestmentPortfolio, fund, or single-asset entry and exit valuations
CAGR = (18,000 / 10,000)^(1 / 5) - 1 = +12.47%Year-by-Year Growth Progression
Simulated constant-rate geometric progression at +12.47% per year.
| Period | Starting Value | Ending Value | Annual Delta | Cumulative Gain |
|---|---|---|---|---|
| Year 1 | $10,000.00 | $11,247.46 | +$1,247.46 | +$1,247.46 |
| Year 2 | $11,247.46 | $12,650.54 | +$1,403.08 | +$2,650.54 |
| Year 3 | $12,650.54 | $14,228.64 | +$1,578.11 | +$4,228.64 |
| Year 4 | $14,228.64 | $16,003.61 | +$1,774.97 | +$6,003.61 |
| Year 5 | $16,003.61 | $18,000.00 | +$1,996.39 | +$8,000.00 |
How It Works
CAGR = (End / Start)^(1 / years) - 1CAGR calculates the constant geometric annual rate that compounds an initial capital base to its final terminal value over a given number of years.
- End
- Final valuation or ending capital balance.
- Start
- Initial investment or baseline starting balance (must be > 0).
- years
- Total elapsed time in fractional or whole years (must be > 0).
- CAGR
- Annualized geometric compound growth rate.
- Assumes smooth, continuous annual geometric compounding between the initial and terminal values.
- Ignores interim cash inflows, periodic deposits, distributions, or withdrawals during the period.
- Ignores transaction commissions, management fees, fund expense ratios, and execution slippage.
- Ignores tax drag, capital gains liabilities, and account withholding.
- Excludes purchasing power inflation drag (models nominal growth; real CAGR requires adjusting for CPI).
Worked Example
$10,000 Growing to $18,000 Over 5 Years
Suppose an investment starts at $10,000 and reaches a final valuation of $18,000 after 5 years.
- Identify baseline parameters: Start = $10,000, End = $18,000, Duration = 5 years.
- Compute the total growth factor: $18,000 / $10,000 = 1.80 (representing an 80.00% absolute gain).
- Calculate the reciprocal exponent: 1 / 5 = 0.20.
- Raise the growth factor to the reciprocal exponent: 1.80^0.20 = 1.12468...
- Subtract 1 to isolate the annualized geometric rate: 1.12468 - 1 = 0.12468 (+12.47%).
- Verification: $10,000 × (1 + 0.12468)^5 = $18,000.
Common Mistakes
Using CAGR when there are interim deposits or withdrawals (point to XIRR for multi-cash-flow schedules, which is coming soon).
Mixing up years and months (e.g. entering 18 months as 18 instead of 1.5 years).
Comparing CAGRs over different time horizons (e.g. comparing a 3-year bull-market CAGR to a 20-year multi-cycle CAGR without controlling for volatility regimes).
Treating historical CAGR as a predictive forecast for future compounding.
Frequently Asked Questions
What is the difference between CAGR and average annual return?+
Arithmetic average return sums individual yearly returns and divides by the number of years, which overstates compounding performance whenever volatility is present. CAGR calculates the exact geometric mean that connects initial capital to final capital, reflecting true compounding.
What is the difference between CAGR and absolute return?+
Absolute return measures the total percentage gain or loss between start and end values regardless of elapsed time (e.g. +80% total return). CAGR normalizes that total return into an annualized geometric rate factoring in duration.
Can CAGR be negative?+
Yes. When the ending value is lower than the starting value, the ratio (End / Start) is less than 1, producing a negative rate. If the ending value drops to zero, the CAGR is -100%.
What is a "good" CAGR?+
CAGR is a descriptive geometric measurement rather than an evaluation label. Whether a CAGR is appropriate depends entirely on the underlying asset class, duration, economic environment, and risk profile. Higher historic CAGRs typically correlate with higher volatility and drawdown risks.
What is the difference between CAGR and XIRR?+
CAGR assumes a single lump-sum initial allocation and a single final liquidation point with zero cash movements in between. XIRR (Extended Internal Rate of Return) handles multiple irregular cash deposits, dividend distributions, and withdrawals at specific dates.
Methodology & Tool Scope
What This Tool Does NOT Cover
To maintain mathematical rigor, this tool isolates capital recovery mechanics and deliberately excludes:
- •Interim cash flows (periodic deposits, withdrawals, or dividend payouts).
- •Capital gains tax drag and taxable account liabilities.
- •Brokerage fees, fund expense ratios, and execution slippage.
- •Purchasing power inflation drag across the holding timeframe.
WealthSyntax provides educational calculators and general information. Results are estimates based on user-entered assumptions and are not financial, investment, tax, legal, or regulatory advice. WealthSyntax does not recommend securities, funds, brokers, or trading strategies.
How to calculate CAGR in Google Sheets and Excel
To calculate Compound Annual Growth Rate in Google Sheets or Excel, use the geometric formula =(End/Start)^(1/Years)-1 or the built-in =RRI(Years, Start, End) function. CAGR determines the constant annual rate that compounds initial capital to its final balance over time, smoothing out periodic volatility into a single annualized metric without requiring interim pricing data.
Related Resources
Loss Recovery Calculator
Calculate the asymmetric percentage return required to recover from portfolio drawdowns using L / (1 - L).
Compound Interest Guide
First-principles breakdown of exponential growth mechanics, logarithmic math, and recurrence relations.
Volatility Drag: Geometric vs Arithmetic Returns
Why CAGR equals the geometric mean and always trails arithmetic averages when returns fluctuate.